We recently compiled a list of the 10 Best Multibagger Penny Stocks of 2025. In this article, we are going to take a look at where Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) stands against the other multibagger penny stocks.
What Are Multibagger Stocks And How To Identify Them
The term “multibagger” was coined by Peter Lynch in his book titled “One Up On Wall Street” to describe those stocks whose share prices increase several times more than an investor’s original investment. Typically, a multibagger stock is one that can be expected to rise by 100% or more – a huge number that warrants the immense attention investors are giving to multibagger stocks today. Lynch himself is an American investor who managed the Magellan Fund at Fidelity Investments from 1977 to 1990. On multibagger stocks, Lynch noted in his book that these are typically fast-growing companies with the potential to yield significant returns over time. He thus considers investment portfolios that own a diverse variety of numerous stocks to be better placed to benefit from multibagger stocks and their growth, in stark contrast to those portfolios that are overly concentrated on investing in a few companies.
When aiming to invest in multibagger stocks, many investors may wonder about where they can begin to look for these miracle-growth companies. The first few things to consider when looking for such stocks include a company’s fundamentals, ability to act as a pioneer in its industry, and the size of the market it operates in. Generally, a multibagger stock is one that has solid financials, such as robust revenue growth and rising profits, and one that is driving innovation in its industry. Additionally, smaller innovative companies operating in a large addressable market also have the potential to be multibaggers in their fields. This is why many multibaggers are actually penny stocks that are just beginning to generate profits and returns for their investors.
Is The Market Favorable For Penny Stocks?
A lot of investors may feel skeptical when it comes to investing in penny stocks or any small or microcap company – for good reason. These stocks are incredibly volatile and make for very risky investments, seeing as their business is just starting out, and there’s really not much to go on with respect to past fundamentals. However, risky investments often end up being highly rewarding, which is why investors who have a greater tolerance for risk in their portfolios generally tend to take a leap with penny stocks.
The market at present also seems to be gearing up to prove beneficial for the overall growth of penny stocks and small-cap companies. According to Chris Retzler, Needham Small Cap Growth Fund’s portfolio manager, while smaller companies are known to be volatile, the long-term outlook for these companies is presently positive. He believes that in the second half of 2024, we may see a broadening of the market, which is generally good for the economy and particularly good for smaller companies that have been underperforming recently.
According to Retzler, one of the main reasons for the growth potential of smaller companies is that they’re incredibly liquid. This factor, coupled with the fact that we are set to see money starting to flow out of bigger companies only to be redirected to smaller companies, means that many small companies and penny stocks may begin to see their share prices rise exponentially. Additionally, the general market expectation to have lower interest rates over the next 12 months is also favorable for penny stocks that don’t really need a lot of money to flow into them before they begin to see higher stock prices and multiple expansion. Will all these developments, many investors are itching to get their hands on multibagger penny stocks, which is why we’ve compiled the following list.
Our Methodology
We used a stock screener to identify stocks trading under $5 with an upside potential of 100% and above to compile our list. The stocks are ranked based on their upside potential as of August 29, from the lowest to the highest. The price targets are analysts’ average estimates for where the stock could be in the next 12 months. We have also mentioned the share prices and number of hedge funds holding a stake in each stock by using Insider Monkey’s hedge fund data for the second quarter.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A laboratory researcher in a white coat, closely examining a microscope.
Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX)
Share Price as of August 29: $1.7
Average Upside Potential as of August 29: 190.7%
Number of Hedge Fund Holders: 12
Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) is another biotech company on our list, based in The Woodlands, Texas. It develops and commercializes pharmaceutical products for treating heart failure, diabetes, and other medical complications.
The biggest catalyst for Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) came in 2023, with the approval of its once-daily oral heart failure drug, Inpefa, by the FDA. Since the approval, the company has managed to rake in impressive sales. Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) saw net sales of $1.6 million and $2.7 million for the first half of 2024. The company also reaffirmed its goal to achieve formulary access favorable for patients and equitable in light of Inpefa’s value, in its second-quarter earnings call.
Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) is also expected to see further growth if its Phase 3 Sonata trial for HCM proves successful. Through this treatment, the company aims to release an effective treatment for hypertrophic cardiomyopathy, a disease that affects around a million patients in the US today, most of whom go undiagnosed. This represents an immense market for Lexicon Pharmaceuticals, Inc.’s (NASDAQ:LXRX) treatment and, thus, a huge opportunity for further growth and profitability.
A total of 12 hedge funds were long Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) in the second quarter, with a total stake value of $48.3 million.
Overall LXRX ranks 4th on our list of the best multibagger penny stocks of 2025. While we acknowledge the potential of LXRX as an investment, we believe that AI stocks hold promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LXRX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.